Many Canadians could feel a sense of pride when the G20 leaders meeting in Pittsburgh late last month declared that this forum of leaders and finance ministers would replace the G7 as the key body to oversee the global economy and chart its future direction.
The idea for a G20 forum of the leaders of the world's most important economies was first outlined by Paul Martin at the World Economic Forum in Davos, Switzerland, in January 2004, not long after he had become prime minister. This was based on Martin's role as the first chair of the G20 of finance ministers, created in 1999 in the aftermath of the Asian financial crisis, and recognition even then that the global dynamic was changing and that emerging new powers such as China, India and Brazil had to be part of the dialogue. The G20 finance ministers met each year from then on, including in Montreal in 2000 and Ottawa in 2001.
In the years that followed, Canadians played a somewhat lonely role, keeping the idea alive through the Centre for International Governance Innovation in Waterloo, Ont., and through the L20 group at the University of Victoria in British Columbia.
But with the global economic crisis blowing up in 2008, then-US president George W. Bush, who previously had little interest in a G20 of leaders, was forced to acknowledge that a workable response to the global economic crisis could not be resolved by the G7 and that the G20 was necessary. The same was true for a number of European countries, such as Germany and Britain, which had been reluctant to see their influence diluted by the presence of new powers.
So the first G20 leaders' summit took place in Washington in November 2008, followed by similar summits in London in March and in Pittsburgh last month. The next will be in Muskoka, Ont., where the Canadian prime minister will co-chair, with the Korean president, the next G20 leaders' summit.
The emergence of the G20 as the principal organizing forum for the global economy is an important advance because over time it will force the emerging market economies, starting with China, to behave as responsible stakeholders for the health of the global system and to do their part to deal with future challenges and help make the global economy function well. This is essential as the new powers become a bigger part of the global economy
Under the previous system, the G7/G8 leaders would invite the leaders of China, India, Brazil and other nations to sit in on some of their sessions, with the status of second-class participants. As a result, these leaders, when solutions to crises were needed, could always hold back, claiming they were outsiders, excluded from the key decision-making. Now they are in the ranks of the decision-makers.
But it will mean a diminution of Canada's influence in this larger body. In the G7/G8, Canada was in the enviable position of being at a small table that, to a large extent, set or tried to set the global agenda. In the much larger G20, the voices of China, India, and Brazil will take on growing importance, leaving Canada in a potentially marginal position.
Canada, increasingly, will only be relevant to the extent that it is able to come forward with good ideas for a sustainable, prosperous and equitable global economy, and is committed to backing up its ideas with financial resources and a willingness to change its own practices if need be.
This will be the Canadian challenge. It means Canadians will have to be more creative and innovative in responding to globalization. Just as Canada once brought forward the concept of UN peacekeeping and the G20 leaders' forum, now it will be pressed to lead in other areas, such as global health, global agriculture and environmental sustainability. This will be Canada's task, and opportunity, at the next summit.
Canada's interest in promoting the G20 was, of course, not totally altruistic. The risk that Canada had faced for some time was that the G7 would be replaced by another small G-grouping, one which included China, India and Brazil but which excluded the G7's two smallest members, Italy and Canada. The Chinese had made it clear they had no interest in being invited to join the G7/G8 since this would imply they had passed some kind of test.
Even today, there is talk of a new G4—the United States, China, Japan and the European Union—as a kind of executive committee for the G20.
For their part, the G7/G8 leaders' at their 2007 summit in Germany had tried to delay the full role of the new powers in global decision making, assigning an awkward and ill-conceived task to the Organization for Economic Co-operation and Development, namely to "educate" China, India, Brazil, Mexico and South Africa on the G7/OECD positions on foreign investment rules, intellectual property protection, energy efficiency and their role in Africa (this was aimed mainly at China, which has its own foreign aid initiatives there).
Not surprisingly, this was seen by these countries—especially China, India and Brazil—as condescending and was not taken seriously.
Moreover, this exercise quickly became irrelevant as the global financial crisis hit the world with a frightening shock in 2008. Now, it was urgent that the new economic powers not only be at the table, but also play a key role in designing and implementing solutions to the crisis. It was obvious that the G7 no longer had the capacity to rescue the world from a crisis.
So we now have a new world order. But establishing the G20 as the principle forum for global economic management doesn't mean easy-going forward. Individual countries will have major differences and reaching agreements will not be easy.
Individual countries will pursue their own interests, as always, as the world faces huge challenges, not only in exiting the current crisis and restoring growth, but dealing with the big challenges. These include climate change, the emergence of a new currency to replace or parallel the US dollar, maintaining an open trading system and reforming big institutions like the International Monetary Fund, including giving the new powers a bigger share of the votes. In a broader sense, managing a world where there will be enormous tasks of accommodating a growing global population, managing the structural adjustment as production shifts to the new players in a more competitive world, dealing with the need for secure energy, and much more are on the agenda.
The G20 has the potential to deal with these issues in a way that keeps the global economy functioning and sustainable, but this outcome is by no means guaranteed. Canadians can be proud of the role they played in helping to create this new body, but will have to work hard to help make it a success. Our first test will come at Muskoka next July.